Bodie Marcus INVESTMENTS Fourth Edition Adyantages of the single index mode Reduces the number of inputs for diversification ■ Portfolio of50 assets 50 expected returns 50 variances 1225 covariance too difficult a task Irwvin/McGrazo-Hill 102 The McGraw-Hill Companies, Inc, 1999Irwin/McGraw-Hill 10-2 © The McGraw-Hill Companies, Inc., 1999 INVESTMENTS Fourth Edition Bodie Kane Marcus „ Reduces the number of inputs for diversification. „ Portfolio of 50 assets „ ---50 expected returns; 50 variances; „ 1225 covariance. „ ---too difficult a task. Advantages of the Single Index Model Advantages of the Single Index Model